Florida broker Barry Kornfeld, who was barred from the securities industry, sold millions of dollars of defunct Woodbridge loans to clients through his company First Financial Tax Group.
The company, which claimed to specialize in real estate loans, advertised that investments in First Position Commercial Mortgages yielded 5%. Kornfeld sold the Woodbridge loans as guaranteed promissory loans, promising that if Woodbridge defaulted, the investors would be paid first because of their position as a note holder.
Since Woodbridge filed Chapter 11 bankruptcy, the company has stopped paying investor distributions and First Financial Tax Group has announced it will be closing. According to the SEC’s filing, some of Kornfeld’s clients had invested close to $1 million in Woodbridge loans.
Kornfeld Previously Banned from Securities Industry
Kornfeld was barred from the securities industry in 2010 by the U.S. Securities and Exchange Commission (SEC) for selling unsuitable collateralized mortgage obligations (CMOs) to clients while working at Brookstreet Securities Corp.
Before the credit crisis, Kornfeld sold high-risk CMOs. According to the SEC, Kornfeld falsely told clients that the CMOs were safe, secure investments that were suitable for low-risk investment profiles. When in fact, the investments were only appropriate for investors with high-risk investment profiles.
In June 2007 Brookstreet failed to meet margin calls for the CMOs and then failed to meet net-capital requirements, essentially deeming the CMOs worthless.
Woodbridge Files for Chapter 11 Bankruptcy
The Woodbridge Group of Companies recently filed for Chapter 11 bankruptcy and has stopped paying investor distributions. The company blames increasing costs, including litigation and compliance expenses, as a reason for its bankruptcy.
Based in Sherman Oaks, California, the company raised more than $1 billion from investors and is currently under SEC investigation. In October, the regulator said it was investigating the company to determine whether it was operating as a fraud.
According to a statement made by the company in the wake of filing for bankruptcy, Woodbridge has a $100 million dollar commitment from investor Hankey Capital and intends to recapitalize $750 million in debt.
The company so far has declined to comment about working with Barry Kornfeld or acknowledge if it was aware that Kornfeld had been previously barred from the securities industry.
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If you lost money as a result of investments made with Barry Kornfeld or are a victim of stockbroker misconduct, contact a qualified securities fraud attorney today.
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